Warren Buffett's Elephant Gun Hits Heinz (Update1)

Written by: Antoine Gara02/14/13 - 3:17 PM EST

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(Adds analyst comments, additional data.)

NEW YORK ( TheStreet) -- After alluding to a $20 billion deal for nearly a year, Warren Buffett of Berkshire Hathaway (BRK.A) aimed his "elephant gun" at H.J. Heinz (HNZ) in one of his largest acquisitions ever.

Berkshire on Thursday announced a deal to buy the iconic ketchup maker for $72.50 a share in cash, in a transaction that values the company at about $28 billion when counting debt.

To buy Heinz, Berkshire will be teaming up with private equity firm 3G Capital , an emerging leader in the food and restaurant industry.

The deal may put to rest months of speculation about where Buffett would invest Berkshire Hathaway's impressive cash hoard next. In 2009, the Oracle of Omaha, as he's known, cut his biggest-ever deal in buying railroad Burlington Northern Santa Fe for $26.5 billion and roughly a year later Berkshire bought chemicals giant Lubrizol in a $10 billion acquisition.

Previously, industrial giants like Deere(DE) and Cummins(CMI) were seen as being a good fit for Buffett's cash stockpile, which stood at over $47 billion as of the third quarter.

At Berkshire Hathaway's annual meeting last May, Buffett fanned speculation about his next large acquisition, announcing the company had come close to cutting a $22 billion deal during the last quarter of 2011. In January, CNBC's David Faber reported that Berkshire was in the running for the New York Stock Exchange (NYX) until a competitor bourse, IntercontinentalExchange(ICE) , prevailed with a higher bid .

In a CNBC interview Thursday, Buffett said he'd been studying Heinz for decades, but formal negotiations started only two months ago. Buffett said Berkshire's partner on the deal, 3G Capital, will split the equity investment and likely take a larger role in running Heinz once the transaction is completed.

With 3G Capital, owner of Burger King Worldwide (BKW) and a large investor in Anheuser-Busch InBev (BUD) , Buffett is expanding Berkshire's reach into the food industry. Always eager to invest in businesses with stable earnings and enduring products, Buffett teamed up with Mars to finance its acquisition of Wm. Wrigley Jr. Co. in 2008 for $23 billion.

Within Berkshire Hathaway's stock portfolio, Coca-Cola(KO) remains a top holding, and Buffett has been seen eating Dairy Queen burgers and ice cream sundaes, another Berkshire-owned company. McLane Industries , another Berkshire holding, is a large food distributor.

"Immediately it gave me flashbacks to the Wrigley and Mars deal," Brian Sozzi, chief equities analyst at NBG Productions, said of Thursday's acquisition.

"Longer term, you are going to see more consolidation in the food and beverage space, chiefly because of inflation," he said, highlighting companies including Hershey's(HSY) or Campbell Soup (CPB) that could have been Berkshire targets.